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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My husband and myself want to sell a half share of our 2nd

Resolved Question:

My husband and myself want to sell a half share of our 2nd home to our son and his partner. For £70000.
We bought the house for £80000 three years ago and it is now valued at 140000. We have spent approx 10000 in major building work, my husband is retired and pays income tax at standard rate, his pension is 24000 I am also retired and have a small pension of 4000.
Can you show us how to work out the capital gains on this and give advice on how to minimise the amount we pay, ie we could spred this over 2 tax years selling 25% to our son this tax year and his partner 25% this next tax year.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

It is your intention to sell half share of the property to your son and partner. As you are retaining 50% share, your profit on sale of 50% share will be

Capital gains tax calculation -

Sale proceeds 50% share = £70,000
Cost price (80,000+10,000)/2 = £45,000
Gain = (70,000-45,000) = £25,000
Capital gains allowance (11,000x2) = £22,000
Gain chargeable to capital gains tax (25,000-22,000) £3,000
CGT at 18% £540

Based of above calculations, CGT payable on sale of half share of your 2nd home would be £540.

My advice would be to complete the transaction in one go in light of this small amount payable. You could make a sale of 25% share in one year and the remaining 25% in the second year but you should consider the lost opportunity of earning interest on another £35,000 from day one.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.
Hi thank you for the above calc. Just one point is the current value of the property of £140,000 not relavent? I assume the capital gains is based on how much we sell the 50% share for? Regards
Expert:  taxadvisor.uk replied 2 years ago.
Caron, thank you for your reply.

The current market value is relevant if you were to sell your 50% share to your son at below market value. For CGT purposes, HMRC would replace the lower figure with market value.

I hope this is helpful and answers your question.
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Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.

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